Why more and more consumers now prefer to share rather than buy

It’s early days yet, though, for the sharing economy in India, compared to, say, China, where the sharing pie is worth upwards of $100 billion.

Technology has redefined the concepts of sharing and renting, as Netflix has done with videos, Uber with transportation and Airbnb in hospitality. That may be just the beginning.

A sizeable sharing economy is opening up on apps and mobile sites that allow users to pick up a mind-boggling array of stuff on rent—designerwear, sofas, refrigerators and microwaves, beanbags, flat screen TVs and much more. The business is tantalizingly attractive and expected to scale to $45-48 billion, from less than a third of that, according to reports by industry lobby Assocham and consultancy Ernst & Young. Millennials — just out of college and into first jobs — are driving the sharing economy.

Renting for them makes more economic sense than buying. It’s early days yet, though, for the sharing economy in India, compared to, say, China, where the sharing pie is worth upwards of $100 billion. Niren Shah, the managing partner at Norwest Venture Partners, says, “It’s nascent, with high-growth potential.

Typically, upwardly mobile youth are comfortable with the sharing economy. It’s not for everyone.” Sreedhar Prasad, lead, e-commerce and startups, at KPMG, adds, “Cars and homestays are where the sharing economy started; it is now expanding to furniture and clothes.”

The immense headroom for growth is attracting entrepreneurs. On July 19, RentoMojo — where users can rent home appliance, bikes, furniture and the like — raised Series B round of $10 million from Bain Capital Ventures and others, including Accel Partners and IDG Ventures. It’s active in eight cities, including Mumbai and Bengaluru, and sees a migratory workforce as a big driver of the sharing economy. GrabOnRent started in 2015 and rents out home appliance to bikes and laptops.

Stage3.co, founded in 2016, helps users access apparel that is sourced via linkages with designers and stars. Furlenco, launched in 2012, has furnished 20,000 houses, with 60% of their customers being bachelors in their late 20s

MAXIMISING ASSET USE Sharing startups work on the premise that an asset can be used multiple times. In apparel, for instance, consumers naturally prefer to own their daily wear. What they would prefer renting is party wear.

That’s because they would not like to repeat partywear, which makes renting a better idea,” says Stage3 founder Sabena Puri. “Clothing is going the Uber way.” Puri claims Stage3 is profitable on each transaction with gross margins of 70%.

Shubham Jain, the 25-year-old co-founder of GrabOnRent, reckons that the sharing economy is a behavior-changing phenomenon. “Today, services like Uber, Ola have reduced the need to buy cars. Now tangible products are available on rent.” Renting rather than buying a product like a microwave or a TV makes sense if the need is for less than 20 months. A period longer than that might be unviable as the rent paid could exceed cost of the product.

“Renting is plug-and-play,” points out Jain. The key challenge, adds Shah of Norwest, is “life of the asset, continuing usage (repeat usage) and the unit economics.”

Besides, renters have to ensure quality of product and reverse logistics as well. “One needs tie-ups with laundry and logistics companies,” points out Prasad of KPMG.

Startups that scale and succeed will have the back end and pain points such as service and maintenance sorted out. An eye for clever designs can help, too — like the Pod at Furlenco, which is a bed, TV, entertainment system, table and phone charging dock in a single unit. That may well be a millennial dream come true.

Furlenco: Uber My Bed This furniture rental startup claims to have furnished more than 20,000 homes in the past two years. It has an ambitious goal to scale ten-fold by 2020, entering two lakh homes. Driving this optimism is what founder Ajith Mohan Karimpan, 38, describes as “power of the shared economy. It solves the problem of need today.”

Earlier, Karimpan says, furniture was owned rather than rented as there was no option. Now, bachelors, who average 28 years of age and constitute 60% of Furlenco’s customers, have the choice of renting furniture via apps. Even newly-married couples, with a joint income of Rs 10 lakh a year, opt to rent furniture, which forms 80% of Furlenco’s business. Appliances account for the rest.

Furlenco contends that paying for two large pizzas is dearer than the cost of renting a couch for a month. A queensized bed works out to Rs 1,000 a month and a study table with chair and side unit can be rented for Rs 1,100.

The five-year-old Furlenco is present in Delhi, Mumbai, Bengaluru and Pune, having raised a total of $36 million (equity and debt) from Lightbox Ventures, banks, NBFCS and HNIs. The money will go into expanding to tier I, II cities.

Furlenco buys solid wood furniture from 40 vendors. On an average, users pay Rs 3,000 per month for products rented out and the average duration of lease is 20 months. When returned to the warehouse, Furlenco’s 250-strong workforce ensures furniture is as good as new, ready to be shipped to another rental address.

(Renting makes sense if use is for 20-22 months. More than that may be unviable... It’s plug and play SHUBHAM JAIN, CO-FOUNDER)

GrabOnRent: Equipped for Everything Accessibility of an asset is how Shubham Jain, 25, co-founder of GrabOnRent, succinctly describes the service he provides. A marketplace for renting projectors, lights, adventure gear, bikes, microwaves, refrigerators and other appliances, GrabOnRent started out in 2015. It has raised $1 million from IvyCap Ventures and Unicorn Ventures and has plans to raise another $5 million soon. GrabOnRent claims to have 9,000 users who have leased out 15,000 products.

To source products, GrabOnRent has 450 partners, including Godrej Appliances and Micromax. It offers free delivery and pick-up once the rental period is over and takes care of maintenance such as aircon servicing during the duration of lease. To rent a washing machine costs Rs 649 a month, a refrigerator, Rs 649 per month and a TV, Rs 899.

“Renting makes sense if use is for 20-22 months. More than that may be unviable. Average use we have seen is 9.5 months,” says Jain. Most of the GrabOnRent users are between 22 and 30, fresh graduates or into their first jobs. “It’s plug and play,” says Jain. “If four guys rent (as it often happens) and one drops out, they have the option to either exit or continue the lease. If they had bought a product, the EMI would still need to be paid by someone. Renting offers flexibility.”

Gross margins are 25-35%, says Jain. GrabOnRent offers services in Bengaluru and Hyderabad at present. The plan is to expand to six more cities, including Delhi, Mumbai and Pune, by May 2018 with the fresh fund-raise.

If the sharing market hasn’t yet exploded, it may be because of lack of awareness. “Education is lacking. We have to unleash renting among people. Users should believe in accessibility of products much like they do in Uber and Airbnb,” adds Jain.

(Three is for the three pillars the startup stands on: curation, styling and rental. We will steer clear of fast fashion and dailywear SABENA PURI, CO-FOUNDER)

Stage3.co: Teenybopper’s Dream In an overcrowded online fashion space, Stage3.co is trying to carve out a niche by renting. It is avoiding fast fashion to focus on designerwear and leveraging linkages with Bollywood stars and fashion designers to offer exclusive collections on lease for both men and women.

If you’re wondering about the name, well here’s the explanation. “Three is for the three pillars the startup stands on: curation, styling and rental,” points out Sabena Puri, who launched Stage3.co in October 2016.

“We don’t buy large inventories and focus on what moves,” adds Puri. Most often, the assets belong to designers such as Anamika Khanna, Manish Malhotra or Rina Dhaka. Stage3 enters into revenue share agreements, sharing the rent with designers.

On her strategy to build the business, Puri says, “We will steer clear of fast fashion and dailywear. Our focus is on the high end. We cannot be a low-cost player. That makes it easy for anyone else to build it and is a difficult zone to survive in.” Stage3 depends a lot on data to source collections that are moving fast. It has an outsourced data scientist and plans to hire a full-timer too.

Stage3 has a team of 30 inhouse designers and also sources unused capacity from others. “A high-end designer may make 20 pieces and has 10 unsold ones. We help them monetise unused capacity by offering it for rent,” says Puri.

Bulk of the orders come from Mumbai and Delhi, with 60% of them being repeats. Designer outfit rentals can range between Rs 20,000 to Rs 3,000 for a night. That’s small change, considering you’d be getting into outfits Kareena Kapoor or Deepika Padukone were seen in.

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